BMO 2016 Timber & Wood Products Summit INVESTOR PRESENTATION - - PowerPoint PPT Presentation

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BMO 2016 Timber & Wood Products Summit INVESTOR PRESENTATION - - PowerPoint PPT Presentation

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BMO 2016 Timber & Wood Products Summit INVESTOR PRESENTATION May 10, 2016 | Seattle, Washington Forward-Looking Statements This presentation and comments associated with it contain forward-looking statements including statements relating

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BMO 2016 Timber & Wood Products Summit

INVESTOR PRESENTATION

May 10, 2016 | Seattle, Washington

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This presentation and comments associated with it contain forward-looking statements including statements relating to U.S. housing recovery, the potential for constrained lumber supply, energy-related opportunities, earnings sensitivity and estimated annual capital expenditures. These statements are subject to the cautionary statement which introduces West Fraser’s 2015 Annual Management’s Discussion & Analysis which can be accessed on the Company website www.westfraser.com.

Forward-Looking Statements

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WEST WEST FRA FRASER SER

THEN THEN NO NOW OU OUR GO GOALS LS

are to develop and maintain…

Excellence in Performance and People Leadership in our Field Challenge and Satisfaction Responsibility in the Communities in Which we Work Profitability Growth

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  • Operational excellence
  • Diversification
  • Product differentiation
  • Integration

Our Strategy

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  • Managing to ensure a committed workforce
  • Cost control and efficiency
  • Continuous reinvestment
  • Internal and external benchmarking and

competition

  • Straightforward, consistent business model

Operational Excellence

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LUMBER

28 mills

PANELS

7 mills

PULP & PAPER

5 mills SPF 4.0 Bfbm SYP 2.3 Bfbm Total 6.3 Bfbm Plywood: 830 MMsf3/8” MDF: 250 MMsf3/4” LVL: 3.2 MMcf NBSK: 570 Mtonnes BCTMP: 650 Mtonnes Newsprint: 135 Mtonnes

Product Diversification

  • North America’s largest lumber producer
  • Largest plywood producer in Canada
  • Third largest pulp producer in Canada
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Lumber 66% Panels 11% Pulp & Paper 23%

Trend Sales Mix ($)

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Operations diversified by geography

Geographic diversification

B.C. 39% Alberta 24% U.S. 37%

Lumber Capacity

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  • Wood as the best environmental choice
  • Renewable resource, sustainable business
  • Expanding applications
  • Bioenergy, full use of the resource

Product Differentiation

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  • Lumber, panels, pulp, newsprint and energy
  • Substantial fibre self-sufficiency
  • Fuller utilization of resource
  • Some benefits from counter-cyclicality
  • Better able to respond to new opportunities

such as bioenergy

Integration (in Canada)

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Demand - North American housing

  • Residential improvements
  • Chinese construction and

industrial applications

  • Japanese housing

Supply

  • Fibre limitations
  • Residual offtake
  • Mill closures
  • People

Efficiency - Capital investment

  • Business model

Earnings Growth Drivers - Lumber

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Returns on Lumber

  • 10%
  • 5%

0% 5% 10% 15% 20% 25% 30% 35% 40% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EBITDA Margin (%) - Lumber

Average: 15%

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U.S. Housing

Million Units

Source: FEA, 03-16

Significant pent up demand bodes well for long-term recovery

Pent Up Housing Demand (conventional + mobile)

0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Production Underlying Demand

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US Housing Single Family Share well below 30 year average

Share of single-family housing starts

Source: FEA

50% 55% 60% 65% 70% 75% 80% 85% 90% 70 75 80 85 90 95 5 10 15 30 year average share = 76%

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Unlike Single-Family, Multi-family has Recovered

Source: U.S. Census Bureau

100 200 300 400 500 600 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Thousands

Single-Family (Left Scale) Multi-Family (Right Scale)

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U.S. Lumber End Use

U.S. Lumber End-use 2015 U.S. Lumber End-use Normalized

Source: FEA and WF

Single Family Construction, 26% Multifamily Construction, 4% Residential Improvements, 37% Industrial Production, 28% Nonresidential/ Mobile, 5% Single Family Construction, 37% Multifamily Construction, 4% Residential Improvements, 29% Industrial Production, 23% Nonresidential/ Mobile, 7%

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Canadian SPF Shipments to China

Source: Council of Forest Industries

* Based on consumption of 11.5 Mfbm per U.S. housing start (average mix of single and multi family)

500 1,000 1,500 2,000 2,500 3,000 3,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

MMfbm

2015 - Equivalent to 205,000 housing starts *

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China Imports of Logs and Lumber

Source: General Administration of Customs of The People’s Republic of China

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Lumber Logs

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B.C. Shipments to Japan

20 40 60 80 100 120 140 200 400 600 800 1,000 1,200 1,400 1,600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Shipments 2x4 Starts

Source: Council of Forest Industries

Mmfbm Thousand 2x4 Starts

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Source: US Census Bureau & Statistics Canada

NO NORTH AMERIC TH AMERICAN AN LUM UMBER BER PR PROD ODUC UCTION TION

75 72 65 53 42 47 49 51 54 56 59

10 10 20 20 30 30 40 40 50 50 60 60 70 70 80 80 7 9 11 11 13 13 15 15 17 17 19 19 21 21 23 23

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Billion Feet

Total North America (R Axis) BC Interior Rest Of Canada US South Rest of US

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North American Lumber Capacity

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Demand - China’s paper, tissue and packaging demand

  • Developing countries’ demand

Supply

  • European paper capacity closures
  • European pulp capacity increases
  • China pulp mill closures
  • South American capacity increases

Reliability - Capital

  • Technology

Earnings Growth Drivers - Pulp

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Chemical Pulp End-Use Products

Printing and Writing Papers 31% Tissue 31% Specialty Papers 19% Fluff Based Products 10% Boxboard 5% Other 4%

Source: PPPC 2013

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BCTMP Pulp End-Use Products

Boxboard 44% Printing & Writing 41% Specialty Papers 8% Newsprint 4% Other 3%

Source: PPPC 2013

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Alberta Newsprint is the lowest cost newsprint producer in North America and a positive contributor to the profitability of our pulp and paper business

Paper — Newsprint

Source: PPPC Cost Survey 2012

Cdn$/tonne

North American Newsprint Cost Structure

Par Exchange Rate ANC

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  • Woodwaste to produce heat and steam to dry

wood products and for electricity and steam for pulp mills

  • Woodwaste to produce electricity to be used or

sold

  • Pulp mill effluent as a source for biogas-electricity

generation

  • Expanding opportunities to generate and sell

electricity levering off current business

Energy Opportunities

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  • Reinvest profits to lower costs, improve efficiency

through technology and improved processes

  • Capital spending in 2015 of $220 million
  • Capital spending 2012 – 2015 in excess of

$1 billion

  • Estimated 2016 spending of $300 million and

normalized spending between $175 and $225 million

  • Growth through opportunistic acquisitions focused
  • n solid wood

Capital Strategy

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West Fraser Capital

358 410 220

50 100 150 200 250 300 350 400 450 2013 2014 2015 Capital Spending Maintenance Timber Profit Improvement Energy

$ Million

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  • Proven ability to generate strong cash flow even in

worst markets

  • Consistent, straightforward business plan
  • Loyal, long-term employee and management base
  • Conservative financial management coupled with

proven ability to grow strategically

  • Strong historical shareholder returns

Why Invest in West Fraser?

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Strong Cash Generation ($millions)

Total 2015 2014 2013 2010-2012

Cash from Operations 1,896 301 475 419 701 Capital Expenditures 1,449 220 410 358 461 Acquisitions 314 76 208

  • 30

Debt/Capitalization 22%

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Share Value Traded

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2015 2014 2013

WFT CFP IFP

Cdn$ Million

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Annualized Shareholder Return (Cdn$)

12.6%

7.4%

3.9% 7.6% 7.1% 5.3% 0% 2% 4% 6% 8% 10% 12% 14%

West Fraser Dow S&P/TSX Competitor A Competitor B Competitor C

June 2006* – December 31, 2015

* June 2006 marked the beginning of the steep decline in U.S. housing starts

Source: TD Bank

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“WFT” – Toronto Stock Exchange www.WestFraser.com

These materials have been prepared by Management of the

  • Company. No regulatory authority has approved or disapproved of

the contents of these materials. These materials do not constitute an

  • ffer to sell or the solicitation of an offer to buy any securities of the

Company, and shall not constitute an offer, solicitation or sale of the Company’s securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. Securities of the Company may not be offered or sold in the United States absent their prior registration or qualification or an applicable exemption from the applicable registration or qualification requirements.

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APPENDIX

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Earnings Sensitivity to Key Variables (2015)

Estimated Earnings Sensitivity to Key Variables

1

(based on 2015 production

  • $ millions)

Factor Variation Change in pre

  • tax e

arnings Lumber price US$ 1 ( per Mfbm ) 78 Plywood price Cdn $ 1 ( per Msf ) 8 NBSK price US$ 1 ( per tonne ) 7 BCTMP price US$ 1 ( pe r tonne ) 9 U.S. – Canadian $ exchange rate

2

US$0.01 ( per Cdn $ ) 28

1. Each sensitivity has been calculated on the basis that all other variables remain constant and assumes year end foreign exchange rates. 2. Excludes exchange impact of translation of U.

  • S. dollar - denominated debt and other monetary items. Reflects the amount of the initial

US$0.01 change; additional changes are substantially, but not exactly, linear.